PayPal's Offline Service Hits its 'Sweet Spot': CEO

Small business "has been the sweet spot" for online bill paying service PayPal and its parent eBay from the beginning, eBay CEO John Donahoe told CNBC.

Photo: Coolcaesar

eBay headquarters in San Jose, California.

Now the company is introducing a new form of PayPal to businesses with "offline channels," he said.

On Thursday PayPal launched a mobile payments service that lets businesses accept credit cards using a small triangular card reader attached to an iPhone.

Called PayPal Here, the service is similar to existing mobile payments services such as Square. PayPal is making the service available for the iPhone users now, with service for Android devices to come.

eBay CEO Donohoe on 'PayPal Here'

John Donahoe, eBay president & CEO, offers insight on PayPal's new service for mobile devices called "PayPal Here", with CNBC's Jon Fortt.

Customers will be able to pay using credit cards, their PayPal accounts or checks in the U.S. But they don't need to have a PayPal account to do so. PayPal will charge a 2.7 percent cut for each credit card and PayPal transaction. Square takes a 2.75 percent charge.

"There are 25 million active sellers on eBay , many of which are small businesses," Donahoe said. "Paypal supports millions of small businesses online, many of whom have offline channels. So we’ll start with our existing customers, and as word gets out and people see the features of the product as well as the pricing, I think we’ll have good merchant adaption."

Donahoe predicted PayPal will double its business over the next three years based on sales on the web and on mobile devices, and that's not counting the move offline. "We're going to where the market is," he said.